Litigation Release No. 18179 / June 6, 2003

On June 5, 2003, the Commission filed a "prime bank" securities fraud case in the United States District Court for the Central District of California charging three unregistered brokers and an offshore corporation with promoting a fraudulent investment scheme called the "Valenvalls Private Placement Program" ("VV-PP"). The defendants are Mary Patten of Naples, Florida, Valenvalls Investment Corporation ("Valenvalls"), a New Zealand corporation with its principal place of business in Naples, Florida, Scott Hamilton of Sheridan, Oregon, and Harold Miller of Alta Loma, California.

The Commission's complaint alleges that the defendants acted as the primary brokers of the VV-PP, a purported "high-yield" trading program, through which they defrauded investors of at least $6 million. The complaint further alleges that through oral representations and written offering materials distributed to investors through a network of brokers, Hamilton and Miller falsely represented that: (1) investors' funds would be used to trade Medium Term Notes ("MTNs") on a secret market; (2) MTN trading would yield returns averaging 100 percent per week; (3) investors' funds would be pooled at Valenvalls, an allegedly insured financial institution that would pay an additional 20 percent return (over and above the guaranteed 100 percent per week); and (4) the VV-PP was "fed controlled" and subject to International Monetary Fund rules and regulations. According to the complaint, after having investors referred from Hamilton and Miller, Patten sent the investors promotional materials about Valenvalls, which falsely represented that: (1) investors would receive individual accounts at Valenvalls, promoted as an `international financeria' that could trade bonds, currency, real estate, and securities and (2) Valenvalls would pay investors a 20 percent return on their investment (over and above the guaranteed 100 percent per week). The Complaint also alleges that Patten sent investors account statements falsely indicating that their funds were earning 20 percent in individual Valenvalls accounts. Ultimately, the complaint alleges, the defendants lulled investors with misrepresentations that the VV-PP was proceeding as planned, when in fact Patten had diverted investors' funds to her personal use.

Based on the facts alleged, the Commission's complaint charges the defendants with securities fraud in violation of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10(b)(5), offering and selling unregistered securities in violation of Securities Act Sections 5(a) and 5(c), and acting as unregistered brokers or dealers in violation of Exchange Act Section 15(a). The Commission is seeking injunctions, accountings, disgorgement of ill-gotten gains (with interest), and civil penalties against all of the defendants.